Migrant happiness in China

In China, surveys find that migrant households’ average happiness (compared with rural households) is lower despite higher income. These findings appear to contradict the standard microeconomic utility function, which predicts that higher income will always result in higher utility. We show that an intuitively plausible modification of the utility function, relating income to status and security utility, preserves standard microeconomic maximization results, and also provides a consistent explanation for the empirical findings on happiness. These results lead to some novel but intuitively plausible implications for economic development in China and elsewhere.